Deck 7: A Intercompany Profits in Depreciable Assets B Intercompany Bondholdings

Question 1

Duff Inc. owns 75% of Paddy Corp. and uses the Equity Method to account for its investment. Paddy purchased $120,000 face value of Duff's 12% par value bonds on January 1, 2011 for $100,000, when Duff's bond liability consisted of $240,000 par of 12% Bonds maturing on January 1, 2021. There was an unamortized bond discount of $20,000 attached to the bonds on that date. Interest payment dates are June 30 and December 31 each year. Straight line amortization is used. Both companies have a December 31 year end. Intercompany bond gains and losses are to be allocated to each company. During 2011, Paddy earned a net income of $80,000 and paid dividends of $20,000. What amount of interest expense, excluding amortization of the bond discount, (if any) would have to be eliminated in 2011 as a result of the intercompany sale of the bonds?

A) None.
B) $12,000.
C) $12,200.
D) $14,400.

Answer 1

D

Question 2

Jay Inc. owns 80% of Tesla Inc. and uses the cost method to account for its investment. The 2013 income statements of both companies are shown below. On January 1, 2013, Tesla sold equipment to Jay at a profit of $3,000. The equipment had a remaining useful life of twenty years on that date. Both companies are subject to an effective tax rate of 40%. The amount of non-controlling interest in Jay's 2013 Consolidated Net Income would be:

A) Nil.
B) $1,458.
C) $1,800.
D) $1,818.

Answer 2

B

Question 3

Jay Inc. owns 80% of Tesla Inc. and uses the cost method to account for its investment. The 2013 income statements of both companies are shown below. On January 1, 2013, Tesla sold equipment to Jay at a profit of $3,000. The equipment had a remaining useful life of twenty years on that date. Both companies are subject to an effective tax rate of 40%. The controlling interest (attributable to the shareholders of Jay) in Jay's 2013 Consolidated Net Income would be:

A) $30,000.
B) $35,832.
C) $36,000.
D) $37,200.

Answer 3

B

Question 4

Rin owns 90% of Stempy Inc. On January 1, 2012, the investment in Stempy account had a balance of $350,000 and Stempy's common stock and retained earnings on that date were valued at $200,000 and $100,889 respectively. Moreover, the assets to which the unamortized acquisition differential relates had a remaining life of 10 years on that date. Rin uses the equity method to account for its investment in Stempy. Rin sold depreciable assets to Stempy on January 1, 2012 at an after-tax gain of $10,000. On January 1, 2013, Stempy sold depreciable assets to Rin at an after-tax gain of $20,000. Both assets are being depreciated over 10 years. Stempy's Net Income and Dividends for 2012 and 2013 are shown below. How much intercompany (after-tax) profit was realized during 2013 from Rin's 2012 sale of assets to Stempy?

A) Nil.
B) $1,000.
C) $2,000.
D) $10,000.

Question 5

Jay Inc. owns 80% of Tesla Inc. and uses the cost method to account for its investment. The 2013 income statements of both companies are shown below. On January 1, 2013, Tesla sold equipment to Jay at a profit of $3,000. The equipment had a remaining useful life of twenty years on that date. Both companies are subject to an effective tax rate of 40%. The amount of depreciation expense appearing on Jay's 2013 Consolidated Income Statement would be:

A) $15,000.
B) $34,850.
C) $34,880.
D) $35,000.

Question 6

Rin owns 90% of Stempy Inc. On January 1, 2012, the investment in Stempy account had a balance of $350,000 and Stempy's common stock and retained earnings on that date were valued at $200,000 and $100,889 respectively. Moreover, the assets to which the unamortized acquisition differential relates had a remaining life of 10 years on that date. Rin uses the equity method to account for its investment in Stempy. Rin sold depreciable assets to Stempy on January 1, 2012 at an after-tax gain of $10,000. On January 1, 2013, Stempy sold depreciable assets to Rin at an after-tax gain of $20,000. Both assets are being depreciated over 10 years. Stempy's Net Income and Dividends for 2012 and 2013 are shown below. What is the total amount of unrealized profit (after-tax) remaining at the end of 2012?

A) $1,000.
B) $2,000.
C) $9,000.
D) $10,000.

Question 7

Duff Inc. owns 75% of Paddy Corp. and uses the Equity Method to account for its investment. Paddy purchased $120,000 face value of Duff's 12% par value bonds on January 1, 2011 for $100,000, when Duff's bond liability consisted of $240,000 par of 12% Bonds maturing on January 1, 2021. There was an unamortized bond discount of $20,000 attached to the bonds on that date. Interest payment dates are June 30 and December 31 each year. Straight line amortization is used. Both companies have a December 31 year end. Intercompany bond gains and losses are to be allocated to each company. During 2011, Paddy earned a net income of $80,000 and paid dividends of $20,000. What amount would be shown on Duff's 2011 Consolidated Statement of Financial Position under bonds payable?

A) $110,000.
B) $111,000.
C) $112,000.
D) $220,000.

Question 8

Jay Inc. owns 80% of Tesla Inc. and uses the cost method to account for its investment. The 2013 income statements of both companies are shown below. On January 1, 2013, Tesla sold equipment to Jay at a profit of $3,000. The equipment had a remaining useful life of twenty years on that date. Both companies are subject to an effective tax rate of 40%. The amount of income tax expense appearing on Jay's 2013 Consolidated Income Statement would be:

A) $24,860.
B) $25,040.
C) $26,000.
D) $34,880.

Question 9

Duff Inc. owns 75% of Paddy Corp. and uses the Equity Method to account for its investment. Paddy purchased $120,000 face value of Duff's 12% par value bonds on January 1, 2011 for $100,000, when Duff's bond liability consisted of $240,000 par of 12% Bonds maturing on January 1, 2021. There was an unamortized bond discount of $20,000 attached to the bonds on that date. Interest payment dates are June 30 and December 31 each year. Straight line amortization is used. Both companies have a December 31 year end. Intercompany bond gains and losses are to be allocated to each company. During 2011, Paddy earned a net income of $80,000 and paid dividends of $20,000. What was the pre-tax gain or loss to Paddy Inc. on the intercompany purchase of the bonds?

A) $20,000 loss.
B) Nil.
C) $20,000 gain.
D) $40,000 loss.

Question 10

Rin owns 90% of Stempy Inc. On January 1, 2012, the investment in Stempy account had a balance of $350,000 and Stempy's common stock and retained earnings on that date were valued at $200,000 and $100,889 respectively. Moreover, the assets to which the unamortized acquisition differential relates had a remaining life of 10 years on that date. Rin uses the equity method to account for its investment in Stempy. Rin sold depreciable assets to Stempy on January 1, 2012 at an after-tax gain of $10,000. On January 1, 2013, Stempy sold depreciable assets to Rin at an after-tax gain of $20,000. Both assets are being depreciated over 10 years. Stempy's Net Income and Dividends for 2012 and 2013 are shown below. What is the balance in the Investment in Stempy account at the end of 2013?

A) $300,000.
B) $350,000.
C) $444,960.
D) $469,000.

Question 11

Jay Inc. owns 80% of Tesla Inc. and uses the cost method to account for its investment. The 2013 income statements of both companies are shown below. On January 1, 2013, Tesla sold equipment to Jay at a profit of $3,000. The equipment had a remaining useful life of twenty years on that date. Both companies are subject to an effective tax rate of 40%. The amount of deferred taxes appearing on Jay's 2013 Consolidated Statement of Financial Position would be:

A) Nil.
B) $1,000.
C) $1,140.
D) $2,550.

Question 12

Duff Inc. owns 75% of Paddy Corp. and uses the Equity Method to account for its investment. Paddy purchased $120,000 face value of Duff's 12% par value bonds on January 1, 2011 for $100,000, when Duff's bond liability consisted of $240,000 par of 12% Bonds maturing on January 1, 2021. There was an unamortized bond discount of $20,000 attached to the bonds on that date. Interest payment dates are June 30 and December 31 each year. Straight line amortization is used. Both companies have a December 31 year end. Intercompany bond gains and losses are to be allocated to each company. During 2011, Paddy earned a net income of $80,000 and paid dividends of $20,000. What was the pre-tax gain or loss to Duff Inc. on the intercompany sale of the bonds?

A) $20,000 loss.
B) $10,000 loss.
C) Nil.
D) $10,000 gain.

Question 13

Rin owns 90% of Stempy Inc. On January 1, 2012, the investment in Stempy account had a balance of $350,000 and Stempy's common stock and retained earnings on that date were valued at $200,000 and $100,889 respectively. Moreover, the assets to which the unamortized acquisition differential relates had a remaining life of 10 years on that date. Rin uses the equity method to account for its investment in Stempy. Rin sold depreciable assets to Stempy on January 1, 2012 at an after-tax gain of $10,000. On January 1, 2013, Stempy sold depreciable assets to Rin at an after-tax gain of $20,000. Both assets are being depreciated over 10 years. Stempy's Net Income and Dividends for 2012 and 2013 are shown below. How much intercompany (after-tax) profit was realized during 2013 on Stempy's 2013 sale of assets to Rin?

A) Nil.
B) $1,000.
C) $2,000.
D) $10,000.

Question 14

Jay Inc. owns 80% of Tesla Inc. and uses the cost method to account for its investment. The 2013 income statements of both companies are shown below. On January 1, 2013, Tesla sold equipment to Jay at a profit of $3,000. The equipment had a remaining useful life of twenty years on that date. Both companies are subject to an effective tax rate of 40%. The amount of Miscellaneous Revenues/Expense appearing on Jay's 2013 Consolidated Income Statement would be:

A) $47,000.
B) $47,600.
C) $50,000.
D) $53,000.

Question 15

King Corp. owns 80% of Kong Corp. and uses the cost method to account for its investment, chapters) Corp. for the Year ended December 31, 2012 are shown below: Other Information: ▪King sold a tract of Land to Kong at a profit of $10,000 during 2012. This land is still the property of Kong Corp.
▪On January 1, 2012, Kong sold equipment to King at a price that was $20,000 higher than its book value. The equipment had a remaining useful life of 4 years from that date.
▪On January 1, 2012, King's inventories contained items purchased from Kong for $10,000. This entire inventory was sold to outsiders during the year. Also during 2012, King sold Inventory to Kong for $50,000. Half this inventory is still in Kong's warehouse at year end. All sales are priced at a 25% mark-up above cost, regardless of whether the sales are internal or external.
▪Kong's Retained Earnings on the date of acquisition amounted to $350,000. There have been no changes to the company's common shares account.
▪Kong's book values did not differ materially from its fair values on the date of acquisition with the following exceptions:
▪Inventory had a Fair value that was $20,000 higher than its book value. This inventory was sold to outsiders during 2012.
▪A Patent (which had not previously been accounted for) was identified on the acquisition date with an estimated fair value of $15,000. The patent had an estimated useful life of 3 years.
▪There was a goodwill impairment loss of $4,000 during 2012.
▪Both companies are subject to an effective tax rate of 40%.
▪Both companies use straight line amortization. The amount of goodwill arising from this business combination is:

A) Nil.
B) $72,000.
C) $130,000.
D) $220,000.

Question 16

King Corp. owns 80% of Kong Corp. and uses the cost method to account for its investment, chapters) Corp. for the Year ended December 31, 2012 are shown below: Other Information: ▪King sold a tract of Land to Kong at a profit of $10,000 during 2012. This land is still the property of Kong Corp.
▪On January 1, 2012, Kong sold equipment to King at a price that was $20,000 higher than its book value. The equipment had a remaining useful life of 4 years from that date.
▪On January 1, 2012, King's inventories contained items purchased from Kong for $10,000. This entire inventory was sold to outsiders during the year. Also during 2012, King sold Inventory to Kong for $50,000. Half this inventory is still in Kong's warehouse at year end. All sales are priced at a 25% mark-up above cost, regardless of whether the sales are internal or external.
▪Kong's Retained Earnings on the date of acquisition amounted to $350,000. There have been no changes to the company's common shares account.
▪Kong's book values did not differ materially from its fair values on the date of acquisition with the following exceptions:
▪Inventory had a Fair value that was $20,000 higher than its book value. This inventory was sold to outsiders during 2012.
▪A Patent (which had not previously been accounted for) was identified on the acquisition date with an estimated fair value of $15,000. The patent had an estimated useful life of 3 years.
▪There was a goodwill impairment loss of $4,000 during 2012.
▪Both companies are subject to an effective tax rate of 40%.
▪Both companies use straight line amortization. The amount of goodwill appearing on King's December 31, 2012 Consolidated Statement of Financial Position would be:

A) Nil.
B) $126,000.
C) $224,000.
D) $240,000.

Question 17

Rin owns 90% of Stempy Inc. On January 1, 2012, the investment in Stempy account had a chapters) valued at $200,000 and $100,889 respectively. Moreover, the assets to which the unamortized acquisition differential relates had a remaining life of 10 years on that date. Rin uses the equity method to account for its investment in Stempy. Rin sold depreciable assets to Stempy on January 1, 2012 at an after-tax gain of $10,000. On January 1, 2013, Stempy sold depreciable assets to Rin at an after-tax gain of $20,000. Both assets are being depreciated over 10 years. Stempy's Net Income and Dividends for 2012 and 2013 are shown below. What is the amount of the amortization of the acquisition differential during 2013?

A) $7,200.
B) $8,800.
C) $10,000.
D) $80,000.

Question 18

Rin owns 90% of Stempy Inc. On January 1, 2012, the investment in Stempy account had a balance of $350,000 and Stempy's common stock and retained earnings on that date were valued at $200,000 and $100,889 respectively. Moreover, the assets to which the unamortized acquisition differential relates had a remaining life of 10 years on that date. Rin uses the equity method to account for its investment in Stempy. Rin sold depreciable assets to Stempy on January 1, 2012 at an after-tax gain of $10,000. On January 1, 2013, Stempy sold depreciable assets to Rin at an after-tax gain of $20,000. Both assets are being depreciated over 10 years. Stempy's Net Income and Dividends for 2012 and 2013 are shown below. What is the total amount of unrealized profit (after-tax) remaining at the end of 2013?

A) Nil.
B) $26,000.
C) $27,000.
D) $30,000.

Question 19

Jay Inc. owns 80% of Tesla Inc. and uses the cost method to account for its investment. The 2013 income statements of both companies are shown below. On January 1, 2013, Tesla sold equipment to Jay at a profit of $3,000. The equipment had a remaining useful life of twenty years on that date. Both companies are subject to an effective tax rate of 40%. The amount of gross profit appearing on Jay's 2013 Consolidated Income Statement would be:

A) $147,000.
B) $147,600.
C) $150,000.
D) $153,000.

Question 20

Duff Inc. owns 75% of Paddy Corp. and uses the Equity Method to account for its investment. Paddy purchased $120,000 face value of Duff's 12% par value bonds on January 1, 2011 for $100,000, when Duff's bond liability consisted of $240,000 par of 12% Bonds maturing on January 1, 2021. There was an unamortized bond discount of $20,000 attached to the bonds on that date. Interest payment dates are June 30 and December 31 each year. Straight line amortization is used. Both companies have a December 31 year end. Intercompany bond gains and losses are to be allocated to each company. During 2011, Paddy earned a net income of $80,000 and paid dividends of $20,000. What would be the pre-tax gain or loss to the combined entity on the intercompany sale of the bonds?

A) $20,000 loss.
B) $10,000 loss.
C) Nil.
D) $10,000 gain.

Question 21

King Corp. owns 80% of Kong Corp. and uses the cost method to account for its investment, which it acquired on January 1, 2012. The Financial Statements of King Corp. and Kong Corp. for the Year ended December 31, 2012 are shown below: Other Information: ▪King sold a tract of Land to Kong at a profit of $10,000 during 2012. This land is still the property of Kong Corp.
▪On January 1, 2012, Kong sold equipment to King at a price that was $20,000 higher than its book value. The equipment had a remaining useful life of 4 years from that date.
▪On January 1, 2012, King's inventories contained items purchased from Kong for $10,000. This entire inventory was sold to outsiders during the year. Also during 2012, King sold Inventory to Kong for $50,000. Half this inventory is still in Kong's warehouse at year end. All sales are priced at a 25% mark-up above cost, regardless of whether the sales are internal or external.
▪Kong's Retained Earnings on the date of acquisition amounted to $350,000. There have been no changes to the company's common shares account.
▪Kong's book values did not differ materially from its fair values on the date of acquisition with the following exceptions:
▪Inventory had a Fair value that was $20,000 higher than its book value. This inventory was sold to outsiders during 2012.
▪A Patent (which had not previously been accounted for) was identified on the acquisition date with an estimated fair value of $15,000. The patent had an estimated useful life of 3 years.
▪There was a goodwill impairment loss of $4,000 during 2012.
▪Both companies are subject to an effective tax rate of 40%.
▪Both companies use straight line amortization. Ignoring income taxes and any minority interest effects, what is the amount of profit realized during 2012 from the intercompany sale of equipment?

A) Nil.
B) $4,000.
C) $5,000.
D) $8,000.

Question 22

King Corp. owns 80% of Kong Corp. and uses the cost method to account for its investment, chapter) Corp. for the Year ended December 31, 2012 are shown below: Other Information: ▪King sold a tract of Land to Kong at a profit of $10,000 during 2012. This land is still the property of Kong Corp.
▪On January 1, 2012, Kong sold equipment to King at a price that was $20,000 higher than its book value. The equipment had a remaining useful life of 4 years from that date.
▪On January 1, 2012, King's inventories contained items purchased from Kong for $10,000. This entire inventory was sold to outsiders during the year. Also during 2012, King sold Inventory to Kong for $50,000. Half this inventory is still in Kong's warehouse at year end. All sales are priced at a 25% mark-up above cost, regardless of whether the sales are internal or external.
▪Kong's Retained Earnings on the date of acquisition amounted to $350,000. There have been no changes to the company's common shares account.
▪Kong's book values did not differ materially from its fair values on the date of acquisition with the following exceptions:
▪Inventory had a Fair value that was $20,000 higher than its book value. This inventory was sold to outsiders during 2012.
▪A Patent (which had not previously been accounted for) was identified on the acquisition date with an estimated fair value of $15,000. The patent had an estimated useful life of 3 years.
▪There was a goodwill impairment loss of $4,000 during 2012.
▪Both companies are subject to an effective tax rate of 40%.
▪Both companies use straight line amortization. What would be the amount appearing on the December 31, 2012 Consolidated Statement of Financial Position for land?

A) $15,000.
B) $17,000.
C) $21,000.
D) $25,000.

Question 23

Ting Corp. owns 75% of Won Corp. and uses the Cost Method to account for its Investment, which it acquired on January 1, 2013. The Financial Statements of Ting Corp. and Won Corp. for the Year ended December 31, 2013 are shown below: Other Information: ▪Won sold a tract of land to Ting at a profit of $20,000 during 2013. This land is still the property of Ting Corp.
▪On January 1, 2013, Won sold equipment to Ting at a price that was $20,000 lower than its book value. The equipment had a remaining useful life of 5 years from that date.
▪On January 1, 2013, Won's inventories contained items purchased from Ting for $120,000. This entire inventory was sold to outsiders during the year. Also during 2013, Won sold inventory to Ting for $30,000. Half this inventory is still in Ting's warehouse at year end. All sales are priced at a 20% mark-up above cost, regardless of whether the sales are internal or external.
▪Won's Retained Earnings on the date of acquisition amounted to $700,000. There have been no changes to the company's common shares account.
▪Won's book values did not differ materially from its fair values on the date of acquisition with the following exceptions:
▪Inventory had a fair value that was $50,000 higher than its book value.
▪A patent (which had not previously been accounted for) was identified on the acquisition date with an estimated fair value of $20,000. The patent had an estimated useful life of 5 years.
▪There was a goodwill impairment loss of $10,000 during 2013.
▪Both companies are subject to an effective tax rate of 40%.
▪Both companies use straight line amortization exclusively.
▪On January 1, 2013, Ting acquired half of Won's bonds for $60,000.
▪The bonds carry a coupon rate of 10% and mature on January 1, 2033. The initial bond issue took place on January 1, 2013. The total discount on the issue date of the bonds was $20,000.
▪Gains and losses from intercompany bond holdings are to be allocated to the two companies when consolidated statements are prepared. What effect would the intercompany bond sale have on Won?

A) Won would record a loss $14,000.
B) Won would record a loss of $10,000.
C) Won would record a gain of $4,000.
D) Won would record a gain of $10,000.

Question 24

King Corp. owns 80% of Kong Corp. and uses the cost method to account for its investment, chapter) Corp. for the Year ended December 31, 2012 are shown below: Other Information: ▪King sold a tract of Land to Kong at a profit of $10,000 during 2012. This land is still the property of Kong Corp.
▪On January 1, 2012, Kong sold equipment to King at a price that was $20,000 higher than its book value. The equipment had a remaining useful life of 4 years from that date.
▪On January 1, 2012, King's inventories contained items purchased from Kong for $10,000. This entire inventory was sold to outsiders during the year. Also during 2012, King sold Inventory to Kong for $50,000. Half this inventory is still in Kong's warehouse at year end. All sales are priced at a 25% mark-up above cost, regardless of whether the sales are internal or external.
▪Kong's Retained Earnings on the date of acquisition amounted to $350,000. There have been no changes to the company's common shares account.
▪Kong's book values did not differ materially from its fair values on the date of acquisition with the following exceptions:
▪Inventory had a Fair value that was $20,000 higher than its book value. This inventory was sold to outsiders during 2012.
▪A Patent (which had not previously been accounted for) was identified on the acquisition date with an estimated fair value of $15,000. The patent had an estimated useful life of 3 years.
▪There was a goodwill impairment loss of $4,000 during 2012.
▪Both companies are subject to an effective tax rate of 40%.
▪Both companies use straight line amortization. What is the total amount of pre-tax profit from intercompany inventory sales that was realized during 2012?

A) $2,000.
B) $5,000.
C) $7,000.
D) $10,000.

Question 25

King Corp. owns 80% of Kong Corp. and uses the cost method to account for its investment, which it acquired on January 1, 2012. The Financial Statements of King Corp. and Kong Corp. for the Year ended December 31, 2012 are shown below: Other Information: ▪King sold a tract of Land to Kong at a profit of $10,000 during 2012. This land is still the property of Kong Corp.
▪On January 1, 2012, Kong sold equipment to King at a price that was $20,000 higher than its book value. The equipment had a remaining useful life of 4 years from that date.
▪On January 1, 2012, King's inventories contained items purchased from Kong for $10,000. This entire inventory was sold to outsiders during the year. Also during 2012, King sold Inventory to Kong for $50,000. Half this inventory is still in Kong's warehouse at year end. All sales are priced at a 25% mark-up above cost, regardless of whether the sales are internal or external.
▪Kong's Retained Earnings on the date of acquisition amounted to $350,000. There have been no changes to the company's common shares account.
▪Kong's book values did not differ materially from its fair values on the date of acquisition with the following exceptions:
▪Inventory had a Fair value that was $20,000 higher than its book value. This inventory was sold to outsiders during 2012.
▪A Patent (which had not previously been accounted for) was identified on the acquisition date with an estimated fair value of $15,000. The patent had an estimated useful life of 3 years.
▪There was a goodwill impairment loss of $4,000 during 2012.
▪Both companies are subject to an effective tax rate of 40%.
▪Both companies use straight line amortization. Ignoring income taxes and any minority interest effects, what is the amount of unrealized profit remaining from the intercompany sale of equipment at December 31, 2012?

A) Nil.
B) $10,000.
C) $15,000.
D) $20,000.

Question 26

King Corp. owns 80% of Kong Corp. and uses the cost method to account for its investment, which it acquired on January 1, 2012. The Financial Statements of King Corp. and Kong Corp. for the Year ended December 31, 2012 are shown below: Other Information: ▪King sold a tract of Land to Kong at a profit of $10,000 during 2012. This land is still the property of Kong Corp.
▪On January 1, 2012, Kong sold equipment to King at a price that was $20,000 higher than its book value. The equipment had a remaining useful life of 4 years from that date.
▪On January 1, 2012, King's inventories contained items purchased from Kong for $10,000. This entire inventory was sold to outsiders during the year. Also during 2012, King sold Inventory to Kong for $50,000. Half this inventory is still in Kong's warehouse at year end. All sales are priced at a 25% mark-up above cost, regardless of whether the sales are internal or external.
▪Kong's Retained Earnings on the date of acquisition amounted to $350,000. There have been no changes to the company's common shares account.
▪Kong's book values did not differ materially from its fair values on the date of acquisition with the following exceptions:
▪Inventory had a Fair value that was $20,000 higher than its book value. This inventory was sold to outsiders during 2012.
▪A Patent (which had not previously been accounted for) was identified on the acquisition date with an estimated fair value of $15,000. The patent had an estimated useful life of 3 years.
▪There was a goodwill impairment loss of $4,000 during 2012.
▪Both companies are subject to an effective tax rate of 40%.
▪Both companies use straight line amortization. What would be the amount of other revenue appearing on King's Consolidated Income Statement for the year ended December 31, 2012?

A) $359,600.
B) $399,600.
C) $410,000.
D) $420,000.

Question 27

King Corp. owns 80% of Kong Corp. and uses the cost method to account for its investment, chapter) Corp. for the Year ended December 31, 2012 are shown below: Other Information: ▪King sold a tract of Land to Kong at a profit of $10,000 during 2012. This land is still the property of Kong Corp.
▪On January 1, 2012, Kong sold equipment to King at a price that was $20,000 higher than its book value. The equipment had a remaining useful life of 4 years from that date.
▪On January 1, 2012, King's inventories contained items purchased from Kong for $10,000. This entire inventory was sold to outsiders during the year. Also during 2012, King sold Inventory to Kong for $50,000. Half this inventory is still in Kong's warehouse at year end. All sales are priced at a 25% mark-up above cost, regardless of whether the sales are internal or external.
▪Kong's Retained Earnings on the date of acquisition amounted to $350,000. There have been no changes to the company's common shares account.
▪Kong's book values did not differ materially from its fair values on the date of acquisition with the following exceptions:
▪Inventory had a Fair value that was $20,000 higher than its book value. This inventory was sold to outsiders during 2012.
▪A Patent (which had not previously been accounted for) was identified on the acquisition date with an estimated fair value of $15,000. The patent had an estimated useful life of 3 years.
▪There was a goodwill impairment loss of $4,000 during 2012.
▪Both companies are subject to an effective tax rate of 40%.
▪Both companies use straight line amortization. What would be the amount appearing on the December 31, 2012 Consolidated Statement of Financial Position for deferred income taxes?

A) Nil.
B) $10,000.
C) $11,200.
D) $12,000.

Question 28

King Corp. owns 80% of Kong Corp. and uses the cost method to account for its investment, chapters) Corp. for the Year ended December 31, 2012 are shown below: Other Information: ▪King sold a tract of Land to Kong at a profit of $10,000 during 2012. This land is still the property of Kong Corp.
▪On January 1, 2012, Kong sold equipment to King at a price that was $20,000 higher than its book value. The equipment had a remaining useful life of 4 years from that date.
▪On January 1, 2012, King's inventories contained items purchased from Kong for $10,000. This entire inventory was sold to outsiders during the year. Also during 2012, King sold Inventory to Kong for $50,000. Half this inventory is still in Kong's warehouse at year end. All sales are priced at a 25% mark-up above cost, regardless of whether the sales are internal or external.
▪Kong's Retained Earnings on the date of acquisition amounted to $350,000. There have been no changes to the company's common shares account.
▪Kong's book values did not differ materially from its fair values on the date of acquisition with the following exceptions:
▪Inventory had a Fair value that was $20,000 higher than its book value. This inventory was sold to outsiders during 2012.
▪A Patent (which had not previously been accounted for) was identified on the acquisition date with an estimated fair value of $15,000. The patent had an estimated useful life of 3 years.
▪There was a goodwill impairment loss of $4,000 during 2012.
▪Both companies are subject to an effective tax rate of 40%.
▪Both companies use straight line amortization. What would be the non-controlling Interest amount appearing on King's Consolidated Statement of Financial Position at January 1, 2012?

A) $100,000.
B) $101,800.
C) $125,000.
D) $185,000.

Question 29

King Corp. owns 80% of Kong Corp. and uses the cost method to account for its investment, chapter) Corp. for the Year ended December 31, 2012 are shown below: Other Information: ▪King sold a tract of Land to Kong at a profit of $10,000 during 2012. This land is still the property of Kong Corp.
▪On January 1, 2012, Kong sold equipment to King at a price that was $20,000 higher than its book value. The equipment had a remaining useful life of 4 years from that date.
▪On January 1, 2012, King's inventories contained items purchased from Kong for $10,000. This entire inventory was sold to outsiders during the year. Also during 2012, King sold Inventory to Kong for $50,000. Half this inventory is still in Kong's warehouse at year end. All sales are priced at a 25% mark-up above cost, regardless of whether the sales are internal or external.
▪Kong's Retained Earnings on the date of acquisition amounted to $350,000. There have been no changes to the company's common shares account.
▪Kong's book values did not differ materially from its fair values on the date of acquisition with the following exceptions:
▪Inventory had a Fair value that was $20,000 higher than its book value. This inventory was sold to outsiders during 2012.
▪A Patent (which had not previously been accounted for) was identified on the acquisition date with an estimated fair value of $15,000. The patent had an estimated useful life of 3 years.
▪There was a goodwill impairment loss of $4,000 during 2012.
▪Both companies are subject to an effective tax rate of 40%.
▪Both companies use straight line amortization. What amount of sales revenue would appear on King's Consolidated Income Statement for the year ended December 31, 2012?

A) $750,000.
B) $790,000.
C) $800,000.
D) $810,000.

Question 30

Ting Corp. owns 75% of Won Corp. and uses the Cost Method to account for its Investment, which it acquired on January 1, 2013. The Financial Statements of Ting Corp. and Won Corp. for the Year ended December 31, 2013 are shown below: Other Information: ▪Won sold a tract of land to Ting at a profit of $20,000 during 2013. This land is still the property of Ting Corp.
▪On January 1, 2013, Won sold equipment to Ting at a price that was $20,000 lower than its book value. The equipment had a remaining useful life of 5 years from that date.
▪On January 1, 2013, Won's inventories contained items purchased from Ting for $120,000. This entire inventory was sold to outsiders during the year. Also during 2013, Won sold inventory to Ting for $30,000. Half this inventory is still in Ting's warehouse at year end. All sales are priced at a 20% mark-up above cost, regardless of whether the sales are internal or external.
▪Won's Retained Earnings on the date of acquisition amounted to $700,000. There have been no changes to the company's common shares account.
▪Won's book values did not differ materially from its fair values on the date of acquisition with the following exceptions:
▪Inventory had a fair value that was $50,000 higher than its book value.
▪A patent (which had not previously been accounted for) was identified on the acquisition date with an estimated fair value of $20,000. The patent had an estimated useful life of 5 years.
▪There was a goodwill impairment loss of $10,000 during 2013.
▪Both companies are subject to an effective tax rate of 40%.
▪Both companies use straight line amortization exclusively.
▪On January 1, 2013, Ting acquired half of Won's bonds for $60,000.
▪The bonds carry a coupon rate of 10% and mature on January 1, 2033. The initial bond issue took place on January 1, 2013. The total discount on the issue date of the bonds was $20,000.
▪Gains and losses from intercompany bond holdings are to be allocated to the two companies when consolidated statements are prepared. What effect would the intercompany bond sale have on Ting's December 31, 2013 Consolidated Income Statement?

A) Ting would record a loss of $15,000.
B) Ting would record a loss of $10,000.
C) Ting would record a gain of $5,000.
D) Ting would record a gain of $15,000.

Question 31

King Corp. owns 80% of Kong Corp. and uses the cost method to account for its investment, chapter) Corp. for the Year ended December 31, 2012 are shown below: Other Information: ▪King sold a tract of Land to Kong at a profit of $10,000 during 2012. This land is still the property of Kong Corp.
▪On January 1, 2012, Kong sold equipment to King at a price that was $20,000 higher than its book value. The equipment had a remaining useful life of 4 years from that date.
▪On January 1, 2012, King's inventories contained items purchased from Kong for $10,000. This entire inventory was sold to outsiders during the year. Also during 2012, King sold Inventory to Kong for $50,000. Half this inventory is still in Kong's warehouse at year end. All sales are priced at a 25% mark-up above cost, regardless of whether the sales are internal or external.
▪Kong's Retained Earnings on the date of acquisition amounted to $350,000. There have been no changes to the company's common shares account.
▪Kong's book values did not differ materially from its fair values on the date of acquisition with the following exceptions:
▪Inventory had a Fair value that was $20,000 higher than its book value. This inventory was sold to outsiders during 2012.
▪A Patent (which had not previously been accounted for) was identified on the acquisition date with an estimated fair value of $15,000. The patent had an estimated useful life of 3 years.
▪There was a goodwill impairment loss of $4,000 during 2012.
▪Both companies are subject to an effective tax rate of 40%.
▪Both companies use straight line amortization. What would be the amount appearing on the December 31, 2012 Consolidated Statement of Financial Position for inventories?

A) $295,000.
B) $296,000.
C) $297,000.
D) $300,000.

Question 32

King Corp. owns 80% of Kong Corp. and uses the cost method to account for its investment, chapter) Corp. for the Year ended December 31, 2012 are shown below: Other Information: ▪King sold a tract of Land to Kong at a profit of $10,000 during 2012. This land is still the property of Kong Corp.
▪On January 1, 2012, Kong sold equipment to King at a price that was $20,000 higher than its book value. The equipment had a remaining useful life of 4 years from that date.
▪On January 1, 2012, King's inventories contained items purchased from Kong for $10,000. This entire inventory was sold to outsiders during the year. Also during 2012, King sold Inventory to Kong for $50,000. Half this inventory is still in Kong's warehouse at year end. All sales are priced at a 25% mark-up above cost, regardless of whether the sales are internal or external.
▪Kong's Retained Earnings on the date of acquisition amounted to $350,000. There have been no changes to the company's common shares account.
▪Kong's book values did not differ materially from its fair values on the date of acquisition with the following exceptions:
▪Inventory had a Fair value that was $20,000 higher than its book value. This inventory was sold to outsiders during 2012.
▪A Patent (which had not previously been accounted for) was identified on the acquisition date with an estimated fair value of $15,000. The patent had an estimated useful life of 3 years.
▪There was a goodwill impairment loss of $4,000 during 2012.
▪Both companies are subject to an effective tax rate of 40%.
▪Both companies use straight line amortization. What would be the amount appearing on the December 31, 2012 Consolidated Income Statement for cost of goods sold?

A) $640,000.
B) $593,000.
C) $590,000.
D) $400,000.

Question 33

King Corp. owns 80% of Kong Corp. and uses the cost method to account for its investment, chapters) Corp. for the Year ended December 31, 2012 are shown below: Other Information: ▪King sold a tract of Land to Kong at a profit of $10,000 during 2012. This land is still the property of Kong Corp.
▪On January 1, 2012, Kong sold equipment to King at a price that was $20,000 higher than its book value. The equipment had a remaining useful life of 4 years from that date.
▪On January 1, 2012, King's inventories contained items purchased from Kong for $10,000. This entire inventory was sold to outsiders during the year. Also during 2012, King sold Inventory to Kong for $50,000. Half this inventory is still in Kong's warehouse at year end. All sales are priced at a 25% mark-up above cost, regardless of whether the sales are internal or external.
▪Kong's Retained Earnings on the date of acquisition amounted to $350,000. There have been no changes to the company's common shares account.
▪Kong's book values did not differ materially from its fair values on the date of acquisition with the following exceptions:
▪Inventory had a Fair value that was $20,000 higher than its book value. This inventory was sold to outsiders during 2012.
▪A Patent (which had not previously been accounted for) was identified on the acquisition date with an estimated fair value of $15,000. The patent had an estimated useful life of 3 years.
▪There was a goodwill impairment loss of $4,000 during 2012.
▪Both companies are subject to an effective tax rate of 40%.
▪Both companies use straight line amortization. What would be the non-controlling interest amount in King's Consolidated Net Income for 2012?

A) $8,240.
B) $10,000.
C) $11,600.
D) $15,000.

Question 34

King Corp. owns 80% of Kong Corp. and uses the cost method to account for its investment, chapters) Corp. for the Year ended December 31, 2012 are shown below: Other Information: ▪King sold a tract of Land to Kong at a profit of $10,000 during 2012. This land is still the property of Kong Corp.
▪On January 1, 2012, Kong sold equipment to King at a price that was $20,000 higher than its book value. The equipment had a remaining useful life of 4 years from that date.
▪On January 1, 2012, King's inventories contained items purchased from Kong for $10,000. This entire inventory was sold to outsiders during the year. Also during 2012, King sold Inventory to Kong for $50,000. Half this inventory is still in Kong's warehouse at year end. All sales are priced at a 25% mark-up above cost, regardless of whether the sales are internal or external.
▪Kong's Retained Earnings on the date of acquisition amounted to $350,000. There have been no changes to the company's common shares account.
▪Kong's book values did not differ materially from its fair values on the date of acquisition with the following exceptions:
▪Inventory had a Fair value that was $20,000 higher than its book value. This inventory was sold to outsiders during 2012.
▪A Patent (which had not previously been accounted for) was identified on the acquisition date with an estimated fair value of $15,000. The patent had an estimated useful life of 3 years.
▪There was a goodwill impairment loss of $4,000 during 2012.
▪Both companies are subject to an effective tax rate of 40%.
▪Both companies use straight line amortization. What is the amount of unamortized acquisition differential (excluding unimpaired goodwill) on December 31, 2012?

A) $4,000.
B) $5,000.
C) $8,000.
D) $10,000.

Question 35

King Corp. owns 80% of Kong Corp. and uses the cost method to account for its investment, chapter) Corp. for the Year ended December 31, 2012 are shown below: Other Information: ▪King sold a tract of Land to Kong at a profit of $10,000 during 2012. This land is still the property of Kong Corp.
▪On January 1, 2012, Kong sold equipment to King at a price that was $20,000 higher than its book value. The equipment had a remaining useful life of 4 years from that date.
▪On January 1, 2012, King's inventories contained items purchased from Kong for $10,000. This entire inventory was sold to outsiders during the year. Also during 2012, King sold Inventory to Kong for $50,000. Half this inventory is still in Kong's warehouse at year end. All sales are priced at a 25% mark-up above cost, regardless of whether the sales are internal or external.
▪Kong's Retained Earnings on the date of acquisition amounted to $350,000. There have been no changes to the company's common shares account.
▪Kong's book values did not differ materially from its fair values on the date of acquisition with the following exceptions:
▪Inventory had a Fair value that was $20,000 higher than its book value. This inventory was sold to outsiders during 2012.
▪A Patent (which had not previously been accounted for) was identified on the acquisition date with an estimated fair value of $15,000. The patent had an estimated useful life of 3 years.
▪There was a goodwill impairment loss of $4,000 during 2012.
▪Both companies are subject to an effective tax rate of 40%.
▪Both companies use straight line amortization. What is the total amount of unrealized pre-tax profits in inventory at the start of 2013?

A) Nil.
B) $2,000.
C) $5,000.
D) $8,000.

Question 36

Ting Corp. owns 75% of Won Corp. and uses the Cost Method to account for its Investment, chapters) for the Year ended December 31, 2013 are shown below: Other Information: ▪Won sold a tract of land to Ting at a profit of $20,000 during 2013. This land is still the property of Ting Corp.
▪On January 1, 2013, Won sold equipment to Ting at a price that was $20,000 lower than its book value. The equipment had a remaining useful life of 5 years from that date.
▪On January 1, 2013, Won's inventories contained items purchased from Ting for $120,000. This entire inventory was sold to outsiders during the year. Also during 2013, Won sold inventory to Ting for $30,000. Half this inventory is still in Ting's warehouse at year end. All sales are priced at a 20% mark-up above cost, regardless of whether the sales are internal or external.
▪Won's Retained Earnings on the date of acquisition amounted to $700,000. There have been no changes to the company's common shares account.
▪Won's book values did not differ materially from its fair values on the date of acquisition with the following exceptions:
▪Inventory had a fair value that was $50,000 higher than its book value.
▪A patent (which had not previously been accounted for) was identified on the acquisition date with an estimated fair value of $20,000. The patent had an estimated useful life of 5 years.
▪There was a goodwill impairment loss of $10,000 during 2013.
▪Both companies are subject to an effective tax rate of 40%.
▪Both companies use straight line amortization exclusively.
▪On January 1, 2013, Ting acquired half of Won's bonds for $60,000.
▪The bonds carry a coupon rate of 10% and mature on January 1, 2033. The initial bond issue took place on January 1, 2013. The total discount on the issue date of the bonds was $20,000.
▪Gains and losses from intercompany bond holdings are to be allocated to the two companies when consolidated statements are prepared. The amount of goodwill arising from this business combination is:

A) $300,000.
B) $500,000.
C) $530,000.
D) $1,010,000.

Question 37

Ting Corp. owns 75% of Won Corp. and uses the Cost Method to account for its Investment, which it acquired on January 1, 2013. The Financial Statements of Ting Corp. and Won Corp. for the Year ended December 31, 2013 are shown below: Other Information: ▪Won sold a tract of land to Ting at a profit of $20,000 during 2013. This land is still the property of Ting Corp.
▪On January 1, 2013, Won sold equipment to Ting at a price that was $20,000 lower than its book value. The equipment had a remaining useful life of 5 years from that date.
▪On January 1, 2013, Won's inventories contained items purchased from Ting for $120,000. This entire inventory was sold to outsiders during the year. Also during 2013, Won sold inventory to Ting for $30,000. Half this inventory is still in Ting's warehouse at year end. All sales are priced at a 20% mark-up above cost, regardless of whether the sales are internal or external.
▪Won's Retained Earnings on the date of acquisition amounted to $700,000. There have been no changes to the company's common shares account.
▪Won's book values did not differ materially from its fair values on the date of acquisition with the following exceptions:
▪Inventory had a fair value that was $50,000 higher than its book value.
▪A patent (which had not previously been accounted for) was identified on the acquisition date with an estimated fair value of $20,000. The patent had an estimated useful life of 5 years.
▪There was a goodwill impairment loss of $10,000 during 2013.
▪Both companies are subject to an effective tax rate of 40%.
▪Both companies use straight line amortization exclusively.
▪On January 1, 2013, Ting acquired half of Won's bonds for $60,000.
▪The bonds carry a coupon rate of 10% and mature on January 1, 2033. The initial bond issue took place on January 1, 2013. The total discount on the issue date of the bonds was $20,000.
▪Gains and losses from intercompany bond holdings are to be allocated to the two companies when consolidated statements are prepared. What effect would the intercompany bond sale have on Ting?

A) Ting would record a loss $5,000.
B) Ting would record a loss of $4,000.
C) Ting would record a gain of $14,000.
D) Ting would record a gain of $15,000.

Question 38

King Corp. owns 80% of Kong Corp. and uses the cost method to account for its investment, chapters) Corp. for the Year ended December 31, 2012 are shown below: Other Information: ▪King sold a tract of Land to Kong at a profit of $10,000 during 2012. This land is still the property of Kong Corp.
▪On January 1, 2012, Kong sold equipment to King at a price that was $20,000 higher than its book value. The equipment had a remaining useful life of 4 years from that date.
▪On January 1, 2012, King's inventories contained items purchased from Kong for $10,000. This entire inventory was sold to outsiders during the year. Also during 2012, King sold Inventory to Kong for $50,000. Half this inventory is still in Kong's warehouse at year end. All sales are priced at a 25% mark-up above cost, regardless of whether the sales are internal or external.
▪Kong's Retained Earnings on the date of acquisition amounted to $350,000. There have been no changes to the company's common shares account.
▪Kong's book values did not differ materially from its fair values on the date of acquisition with the following exceptions:
▪Inventory had a Fair value that was $20,000 higher than its book value. This inventory was sold to outsiders during 2012.
▪A Patent (which had not previously been accounted for) was identified on the acquisition date with an estimated fair value of $15,000. The patent had an estimated useful life of 3 years.
▪There was a goodwill impairment loss of $4,000 during 2012.
▪Both companies are subject to an effective tax rate of 40%.
▪Both companies use straight line amortization. What would be the amount of consolidated patents appearing on King's Consolidated Statement of Financial Position as at December 31, 2012?

A) $8,000.
B) $10,000.
C) $12,000.
D) $15,000.

Question 39

Ting Corp. owns 75% of Won Corp. and uses the Cost Method to account for its Investment, chapters) for the Year ended December 31, 2013 are shown below: Other Information: ▪Won sold a tract of land to Ting at a profit of $20,000 during 2013. This land is still the property of Ting Corp.
▪On January 1, 2013, Won sold equipment to Ting at a price that was $20,000 lower than its book value. The equipment had a remaining useful life of 5 years from that date.
▪On January 1, 2013, Won's inventories contained items purchased from Ting for $120,000. This entire inventory was sold to outsiders during the year. Also during 2013, Won sold inventory to Ting for $30,000. Half this inventory is still in Ting's warehouse at year end. All sales are priced at a 20% mark-up above cost, regardless of whether the sales are internal or external.
▪Won's Retained Earnings on the date of acquisition amounted to $700,000. There have been no changes to the company's common shares account.
▪Won's book values did not differ materially from its fair values on the date of acquisition with the following exceptions:
▪Inventory had a fair value that was $50,000 higher than its book value.
▪A patent (which had not previously been accounted for) was identified on the acquisition date with an estimated fair value of $20,000. The patent had an estimated useful life of 5 years.
▪There was a goodwill impairment loss of $10,000 during 2013.
▪Both companies are subject to an effective tax rate of 40%.
▪Both companies use straight line amortization exclusively.
▪On January 1, 2013, Ting acquired half of Won's bonds for $60,000.
▪The bonds carry a coupon rate of 10% and mature on January 1, 2033. The initial bond issue took place on January 1, 2013. The total discount on the issue date of the bonds was $20,000.
▪Gains and losses from intercompany bond holdings are to be allocated to the two companies when consolidated statements are prepared. What amount of sales revenue would appear on Ting's Consolidated Income Statement for the year ended December 31, 2013?

A) $1,450,000.
B) $1,480,000.
C) $1,570,000.
D) $1,600,000.

Question 40

Ting Corp. owns 75% of Won Corp. and uses the Cost Method to account for its Investment, which it acquired on January 1, 2013. The Financial Statements of Ting Corp. and Won Corp. for the Year ended December 31, 2013 are shown below: Other Information: ▪Won sold a tract of land to Ting at a profit of $20,000 during 2013. This land is still the property of Ting Corp.
▪On January 1, 2013, Won sold equipment to Ting at a price that was $20,000 lower than its book value. The equipment had a remaining useful life of 5 years from that date.
▪On January 1, 2013, Won's inventories contained items purchased from Ting for $120,000. This entire inventory was sold to outsiders during the year. Also during 2013, Won sold inventory to Ting for $30,000. Half this inventory is still in Ting's warehouse at year end. All sales are priced at a 20% mark-up above cost, regardless of whether the sales are internal or external.
▪Won's Retained Earnings on the date of acquisition amounted to $700,000. There have been no changes to the company's common shares account.
▪Won's book values did not differ materially from its fair values on the date of acquisition with the following exceptions:
▪Inventory had a fair value that was $50,000 higher than its book value.
▪A patent (which had not previously been accounted for) was identified on the acquisition date with an estimated fair value of $20,000. The patent had an estimated useful life of 5 years.
▪There was a goodwill impairment loss of $10,000 during 2013.
▪Both companies are subject to an effective tax rate of 40%.
▪Both companies use straight line amortization exclusively.
▪On January 1, 2013, Ting acquired half of Won's bonds for $60,000.
▪The bonds carry a coupon rate of 10% and mature on January 1, 2033. The initial bond issue took place on January 1, 2013. The total discount on the issue date of the bonds was $20,000.
▪Gains and losses from intercompany bond holdings are to be allocated to the two companies when consolidated statements are prepared. What would be the carrying value of the bonds payable appearing on Ting's December 31, 2013 Consolidated Statement of Financial Position?

A) $64,500.
B) $65,000.
C) $65,500.
D) $131,000.

Question 41

The Financial Statements of Plax Inc. and Slate Corp for the Year ended December 31, 2012 chapters) Other Information:
▪Plax acquired 75% of Slate on January 1, 2008 for $196,000, when Slate's retained earnings was $80,000 and the acquisition differential was attributable entirely to goodwill. There were impairment losses to the goodwill of $6,400 and $1,600 in 2009 and 2012 respectively.
▪Plax uses the cost method to account for its investment.
▪Slate has 10% par value bonds outstanding in the amount of $200,000 which mature on December 31, 2015. The bonds were issued at a premium. On January 1, 2012 the unamortized premium amounted to $2,400 Slate uses the straight line method to amortize the premium.
▪On January 1, 2012, Plax acquired $120,000 face value of Slate's bonds for $123,000 Plax also uses the straight line method to amortize any bond premium or discount.
▪Both companies are subject to a 40% Tax rate.
▪Gains and losses from intercompany bond holdings are to be allocated to the two companies when Consolidated Financial Statements are prepared. Prepare a Statement of Consolidated Retained Earnings for the year ended December 31, 2012 for Plax Inc.

Question 42

Ting Corp. owns 75% of Won Corp. and uses the Cost Method to account for its Investment, which it acquired on January 1, 2013. The Financial Statements of Ting Corp. and Won Corp. for the Year ended December 31, 2013 are shown below: Other Information: ▪Won sold a tract of land to Ting at a profit of $20,000 during 2013. This land is still the property of Ting Corp.
▪On January 1, 2013, Won sold equipment to Ting at a price that was $20,000 lower than its book value. The equipment had a remaining useful life of 5 years from that date.
▪On January 1, 2013, Won's inventories contained items purchased from Ting for $120,000. This entire inventory was sold to outsiders during the year. Also during 2013, Won sold inventory to Ting for $30,000. Half this inventory is still in Ting's warehouse at year end. All sales are priced at a 20% mark-up above cost, regardless of whether the sales are internal or external.
▪Won's Retained Earnings on the date of acquisition amounted to $700,000. There have been no changes to the company's common shares account.
▪Won's book values did not differ materially from its fair values on the date of acquisition with the following exceptions:
▪Inventory had a fair value that was $50,000 higher than its book value.
▪A patent (which had not previously been accounted for) was identified on the acquisition date with an estimated fair value of $20,000. The patent had an estimated useful life of 5 years.
▪There was a goodwill impairment loss of $10,000 during 2013.
▪Both companies are subject to an effective tax rate of 40%.
▪Both companies use straight line amortization exclusively.
▪On January 1, 2013, Ting acquired half of Won's bonds for $60,000.
▪The bonds carry a coupon rate of 10% and mature on January 1, 2033. The initial bond issue took place on January 1, 2013. The total discount on the issue date of the bonds was $20,000.
▪Gains and losses from intercompany bond holdings are to be allocated to the two companies when consolidated statements are prepared. Ignoring income taxes, what is the amount of profit/(loss) realized during 2013 from the intercompany sale of equipment?

A) $4,000 loss.
B) $2,800 gain.
C) $4,000 gain.
D) $20,000 gain.

Question 43

Ting Corp. owns 75% of Won Corp. and uses the Cost Method to account for its Investment, chapters) for the Year ended December 31, 2013 are shown below: Other Information: ▪Won sold a tract of land to Ting at a profit of $20,000 during 2013. This land is still the property of Ting Corp.
▪On January 1, 2013, Won sold equipment to Ting at a price that was $20,000 lower than its book value. The equipment had a remaining useful life of 5 years from that date.
▪On January 1, 2013, Won's inventories contained items purchased from Ting for $120,000. This entire inventory was sold to outsiders during the year. Also during 2013, Won sold inventory to Ting for $30,000. Half this inventory is still in Ting's warehouse at year end. All sales are priced at a 20% mark-up above cost, regardless of whether the sales are internal or external.
▪Won's Retained Earnings on the date of acquisition amounted to $700,000. There have been no changes to the company's common shares account.
▪Won's book values did not differ materially from its fair values on the date of acquisition with the following exceptions:
▪Inventory had a fair value that was $50,000 higher than its book value.
▪A patent (which had not previously been accounted for) was identified on the acquisition date with an estimated fair value of $20,000. The patent had an estimated useful life of 5 years.
▪There was a goodwill impairment loss of $10,000 during 2013.
▪Both companies are subject to an effective tax rate of 40%.
▪Both companies use straight line amortization exclusively.
▪On January 1, 2013, Ting acquired half of Won's bonds for $60,000.
▪The bonds carry a coupon rate of 10% and mature on January 1, 2033. The initial bond issue took place on January 1, 2013. The total discount on the issue date of the bonds was $20,000.
▪Gains and losses from intercompany bond holdings are to be allocated to the two companies when consolidated statements are prepared. What is the amount of unamortized acquisition differential (excluding unimpaired goodwill) on December 31, 2013?

A) $4,000.
B) $8,000.
C) $16,000.
D) $26,000.

Question 44

The Financial Statements of Plax Inc. and Slate Corp for the Year ended December 31, 2012 are shown below: Other Information:
▪Plax acquired 75% of Slate on January 1, 2008 for $196,000, when Slate's retained earnings was $80,000 and the acquisition differential was attributable entirely to goodwill. There were impairment losses to the goodwill of $6,400 and $1,600 in 2009 and 2012 respectively.
▪Plax uses the cost method to account for its investment.
▪Slate has 10% par value bonds outstanding in the amount of $200,000 which mature on December 31, 2015. The bonds were issued at a premium. On January 1, 2012 the unamortized premium amounted to $2,400 Slate uses the straight line method to amortize the premium.
▪On January 1, 2012, Plax acquired $120,000 face value of Slate's bonds for $123,000 Plax also uses the straight line method to amortize any bond premium or discount.
▪Both companies are subject to a 40% Tax rate.
▪Gains and losses from intercompany bond holdings are to be allocated to the two companies when Consolidated Financial Statements are prepared. Prepare a summary of intercompany bond transactions. Be sure to show the gain or loss for each company as well as the effect on the consolidated entity.

Question 45

Hot Inc. owns 60% of Cold Inc, which it purchased on January 1, 2012 for $540,000. On that date, Cold's retained earnings and common stock were valued at $100,000 and $250,000 respectively. Cold's book values approximated its fair market values on that date, with the exception of the company's Inventory and a patent identified on acquisition. The patent had an estimated useful life of 10 years from the date of acquisition. The inventory had a book value that was $10,000 in excess of its fair value, while the patent had a fair market value of $50,000. Hot uses the equity method to account for its investment in Cold Inc. The inventory on hand on the acquisition date was sold to outside parties during the year. Hot Inc. sold depreciable assets to Cold on January 1, 2012, at a loss of $15,000. On January 1, 2013, Cold sold depreciable assets to Hot at a gain of $10,000 Both assets had a remaining useful life of 5 years on the date of their intercompany sale. During 2012, Cold sold inventory to Hot in the amount of $18,000. This inventory was sold to outside parties during 2013. During 2013, Hot sold inventory to Cold for $45,000. One third of this inventory was still in Cold's warehouse on December 31, 2013. All sales (both internal and external) are priced to provide the seller with a mark-up of 50% above cost. Cold's Net Income and Dividends for 2012 and 2013 are shown below. Both companies are subject to a tax rate of 20%. Prepare a schedule of Realized and Unrealized profits for 2012 and 2013 for both companies. Show your figures before and after tax.

Question 46

The Financial Statements of Plax Inc. and Slate Corp for the Year ended December 31, 2012 are shown below: Other Information:
▪Plax acquired 75% of Slate on January 1, 2008 for $196,000, when Slate's retained earnings was $80,000 and the acquisition differential was attributable entirely to goodwill. There were impairment losses to the goodwill of $6,400 and $1,600 in 2009 and 2012 respectively.
▪Plax uses the cost method to account for its investment.
▪Slate has 10% par value bonds outstanding in the amount of $200,000 which mature on December 31, 2015. The bonds were issued at a premium. On January 1, 2012 the unamortized premium amounted to $2,400 Slate uses the straight line method to amortize the premium.
▪On January 1, 2012, Plax acquired $120,000 face value of Slate's bonds for $123,000 Plax also uses the straight line method to amortize any bond premium or discount.
▪Both companies are subject to a 40% Tax rate.
▪Gains and losses from intercompany bond holdings are to be allocated to the two companies when Consolidated Financial Statements are prepared. Prepare a summary of intercompany interest revenues and expenses.

Question 47

The Financial Statements of Plax Inc. and Slate Corp for the Year ended December 31, 2012 are shown below: Other Information:
▪Plax acquired 75% of Slate on January 1, 2008 for $196,000, when Slate's retained earnings was $80,000 and the acquisition differential was attributable entirely to goodwill. There were impairment losses to the goodwill of $6,400 and $1,600 in 2009 and 2012 respectively.
▪Plax uses the cost method to account for its investment.
▪Slate has 10% par value bonds outstanding in the amount of $200,000 which mature on December 31, 2015. The bonds were issued at a premium. On January 1, 2012 the unamortized premium amounted to $2,400 Slate uses the straight line method to amortize the premium.
▪On January 1, 2012, Plax acquired $120,000 face value of Slate's bonds for $123,000 Plax also uses the straight line method to amortize any bond premium or discount.
▪Both companies are subject to a 40% Tax rate.
▪Gains and losses from intercompany bond holdings are to be allocated to the two companies when Consolidated Financial Statements are prepared. Prepare a detailed calculation of consolidated retained earnings as at December 31, 2012. Do not prepare a Statement of Retained Earnings for this requirement.

Question 48

The Financial Statements of Plax Inc. and Slate Corp for the Year ended December 31, 2012 are shown below: Other Information:
▪Plax acquired 75% of Slate on January 1, 2008 for $196,000, when Slate's retained earnings was $80,000 and the acquisition differential was attributable entirely to goodwill. There were impairment losses to the goodwill of $6,400 and $1,600 in 2009 and 2012 respectively.
▪Plax uses the cost method to account for its investment.
▪Slate has 10% par value bonds outstanding in the amount of $200,000 which mature on December 31, 2015. The bonds were issued at a premium. On January 1, 2012 the unamortized premium amounted to $2,400 Slate uses the straight line method to amortize the premium.
▪On January 1, 2012, Plax acquired $120,000 face value of Slate's bonds for $123,000 Plax also uses the straight line method to amortize any bond premium or discount.
▪Both companies are subject to a 40% Tax rate.
▪Gains and losses from intercompany bond holdings are to be allocated to the two companies when Consolidated Financial Statements are prepared. Prepare a detailed calculation of Consolidated Net Income. Do not prepare an income statement for this requirement.

Question 49

Ting Corp. owns 75% of Won Corp. and uses the Cost Method to account for its Investment, chapters) for the Year ended December 31, 2013 are shown below: Other Information: ▪Won sold a tract of land to Ting at a profit of $20,000 during 2013. This land is still the property of Ting Corp.
▪On January 1, 2013, Won sold equipment to Ting at a price that was $20,000 lower than its book value. The equipment had a remaining useful life of 5 years from that date.
▪On January 1, 2013, Won's inventories contained items purchased from Ting for $120,000. This entire inventory was sold to outsiders during the year. Also during 2013, Won sold inventory to Ting for $30,000. Half this inventory is still in Ting's warehouse at year end. All sales are priced at a 20% mark-up above cost, regardless of whether the sales are internal or external.
▪Won's Retained Earnings on the date of acquisition amounted to $700,000. There have been no changes to the company's common shares account.
▪Won's book values did not differ materially from its fair values on the date of acquisition with the following exceptions:
▪Inventory had a fair value that was $50,000 higher than its book value.
▪A patent (which had not previously been accounted for) was identified on the acquisition date with an estimated fair value of $20,000. The patent had an estimated useful life of 5 years.
▪There was a goodwill impairment loss of $10,000 during 2013.
▪Both companies are subject to an effective tax rate of 40%.
▪Both companies use straight line amortization exclusively.
▪On January 1, 2013, Ting acquired half of Won's bonds for $60,000.
▪The bonds carry a coupon rate of 10% and mature on January 1, 2033. The initial bond issue took place on January 1, 2013. The total discount on the issue date of the bonds was $20,000.
▪Gains and losses from intercompany bond holdings are to be allocated to the two companies when consolidated statements are prepared. What would be the amount of consolidated patents appearing on Ting's Consolidated Statement of Financial Position as at December 31, 2013?

A) $14,000.
B) $15,000.
C) $16,000.
D) $18,000.

Question 50

Ting Corp. owns 75% of Won Corp. and uses the Cost Method to account for its Investment, chapter) for the Year ended December 31, 2013 are shown below: Other Information: ▪Won sold a tract of land to Ting at a profit of $20,000 during 2013. This land is still the property of Ting Corp.
▪On January 1, 2013, Won sold equipment to Ting at a price that was $20,000 lower than its book value. The equipment had a remaining useful life of 5 years from that date.
▪On January 1, 2013, Won's inventories contained items purchased from Ting for $120,000. This entire inventory was sold to outsiders during the year. Also during 2013, Won sold inventory to Ting for $30,000. Half this inventory is still in Ting's warehouse at year end. All sales are priced at a 20% mark-up above cost, regardless of whether the sales are internal or external.
▪Won's Retained Earnings on the date of acquisition amounted to $700,000. There have been no changes to the company's common shares account.
▪Won's book values did not differ materially from its fair values on the date of acquisition with the following exceptions:
▪Inventory had a fair value that was $50,000 higher than its book value.
▪A patent (which had not previously been accounted for) was identified on the acquisition date with an estimated fair value of $20,000. The patent had an estimated useful life of 5 years.
▪There was a goodwill impairment loss of $10,000 during 2013.
▪Both companies are subject to an effective tax rate of 40%.
▪Both companies use straight line amortization exclusively.
▪On January 1, 2013, Ting acquired half of Won's bonds for $60,000.
▪The bonds carry a coupon rate of 10% and mature on January 1, 2033. The initial bond issue took place on January 1, 2013. The total discount on the issue date of the bonds was $20,000.
▪Gains and losses from intercompany bond holdings are to be allocated to the two companies when consolidated statements are prepared. Ignoring taxes, what is the total amount of unrealized profits in inventory at the end of 2013?

A) $2,500.
B) $3,000.
C) $5,000.
D) $20,000.

Question 51

The Financial Statements of Plax Inc. and Slate Corp for the Year ended December 31, 2012 chapters) Other Information:
▪Plax acquired 75% of Slate on January 1, 2008 for $196,000, when Slate's retained earnings was $80,000 and the acquisition differential was attributable entirely to goodwill. There were impairment losses to the goodwill of $6,400 and $1,600 in 2009 and 2012 respectively.
▪Plax uses the cost method to account for its investment.
▪Slate has 10% par value bonds outstanding in the amount of $200,000 which mature on December 31, 2015. The bonds were issued at a premium. On January 1, 2012 the unamortized premium amounted to $2,400 Slate uses the straight line method to amortize the premium.
▪On January 1, 2012, Plax acquired $120,000 face value of Slate's bonds for $123,000 Plax also uses the straight line method to amortize any bond premium or discount.
▪Both companies are subject to a 40% Tax rate.
▪Gains and losses from intercompany bond holdings are to be allocated to the two companies when Consolidated Financial Statements are prepared. Prepare a detailed calculation of consolidated retained earnings as at January 1, 2012. Do not prepare a Statement of Retained Earnings for this requirement.

Question 52

Ting Corp. owns 75% of Won Corp. and uses the Cost Method to account for its Investment, chapters) for the Year ended December 31, 2013 are shown below: Other Information: ▪Won sold a tract of land to Ting at a profit of $20,000 during 2013. This land is still the property of Ting Corp.
▪On January 1, 2013, Won sold equipment to Ting at a price that was $20,000 lower than its book value. The equipment had a remaining useful life of 5 years from that date.
▪On January 1, 2013, Won's inventories contained items purchased from Ting for $120,000. This entire inventory was sold to outsiders during the year. Also during 2013, Won sold inventory to Ting for $30,000. Half this inventory is still in Ting's warehouse at year end. All sales are priced at a 20% mark-up above cost, regardless of whether the sales are internal or external.
▪Won's Retained Earnings on the date of acquisition amounted to $700,000. There have been no changes to the company's common shares account.
▪Won's book values did not differ materially from its fair values on the date of acquisition with the following exceptions:
▪Inventory had a fair value that was $50,000 higher than its book value.
▪A patent (which had not previously been accounted for) was identified on the acquisition date with an estimated fair value of $20,000. The patent had an estimated useful life of 5 years.
▪There was a goodwill impairment loss of $10,000 during 2013.
▪Both companies are subject to an effective tax rate of 40%.
▪Both companies use straight line amortization exclusively.
▪On January 1, 2013, Ting acquired half of Won's bonds for $60,000.
▪The bonds carry a coupon rate of 10% and mature on January 1, 2033. The initial bond issue took place on January 1, 2013. The total discount on the issue date of the bonds was $20,000.
▪Gains and losses from intercompany bond holdings are to be allocated to the two companies when consolidated statements are prepared. What would be the amount appearing on the December 31, 2013 Consolidated Statement of Financial Position for deferred income taxes?

A) $600.
B) $900.
C) $1,200.
D) $2,600.

Question 53

The Financial Statements of Plax Inc. and Slate Corp for the Year ended December 31, 2012 are shown below: Other Information:
▪Plax acquired 75% of Slate on January 1, 2008 for $196,000, when Slate's retained earnings was $80,000 and the acquisition differential was attributable entirely to goodwill. There were impairment losses to the goodwill of $6,400 and $1,600 in 2009 and 2012 respectively.
▪Plax uses the cost method to account for its investment.
▪Slate has 10% par value bonds outstanding in the amount of $200,000 which mature on December 31, 2015. The bonds were issued at a premium. On January 1, 2012 the unamortized premium amounted to $2,400 Slate uses the straight line method to amortize the premium.
▪On January 1, 2012, Plax acquired $120,000 face value of Slate's bonds for $123,000 Plax also uses the straight line method to amortize any bond premium or discount.
▪Both companies are subject to a 40% Tax rate.
▪Gains and losses from intercompany bond holdings are to be allocated to the two companies when Consolidated Financial Statements are prepared. Prepare Plax's Consolidated Income Statement for the year ended December 31, 2012. Show the allocation of Consolidated Net Income between the controlling and non-controlling shareholders.

Question 54

Hot Inc. owns 60% of Cold Inc, which it purchased on January 1, 2012 for $540,000. On that date, Cold's retained earnings and common stock were valued at $100,000 and $250,000 respectively. Cold's book values approximated its fair market values on that date, with the exception of the company's Inventory and a patent identified on acquisition. The patent had an estimated useful life of 10 years from the date of acquisition. The inventory had a book value that was $10,000 in excess of its fair value, while the patent had a fair market value of $50,000. Hot uses the equity method to account for its investment in Cold Inc. The inventory on hand on the acquisition date was sold to outside parties during the year. Hot Inc. sold depreciable assets to Cold on January 1, 2012, at a loss of $15,000. On January 1, 2013, Cold sold depreciable assets to Hot at a gain of $10,000 Both assets had a remaining useful life of 5 years on the date of their intercompany sale. During 2012, Cold sold inventory to Hot in the amount of $18,000. This inventory was sold to outside parties during 2013. During 2013, Hot sold inventory to Cold for $45,000. One third of this inventory was still in Cold's warehouse on December 31, 2013. All sales (both internal and external) are priced to provide the seller with a mark-up of 50% above cost. Cold's Net Income and Dividends for 2012 and 2013 are shown below. Both companies are subject to a tax rate of 20%. Compute the amount of income tax that would be deferred as at December 31, 2013.

Question 55

Hot Inc. owns 60% of Cold Inc, which it purchased on January 1, 2012 for $540,000. On that date, Cold's retained earnings and common stock were valued at $100,000 and $250,000 respectively. Cold's book values approximated its fair market values on that date, with the exception of the company's Inventory and a patent identified on acquisition. The patent had an estimated useful life of 10 years from the date of acquisition. The inventory had a book value that was $10,000 in excess of its fair value, while the patent had a fair market value of $50,000. Hot uses the equity method to account for its investment in Cold Inc. The inventory on hand on the acquisition date was sold to outside parties during the year. Hot Inc. sold depreciable assets to Cold on January 1, 2012, at a loss of $15,000. On January 1, 2013, Cold sold depreciable assets to Hot at a gain of $10,000 Both assets had a remaining useful life of 5 years on the date of their intercompany sale. During 2012, Cold sold inventory to Hot in the amount of $18,000. This inventory was sold to outside parties during 2013. During 2013, Hot sold inventory to Cold for $45,000. One third of this inventory was still in Cold's warehouse on December 31, 2013. All sales (both internal and external) are priced to provide the seller with a mark-up of 50% above cost. Cold's Net Income and Dividends for 2012 and 2013 are shown below. Both companies are subject to a tax rate of 20%. Compute the Balance in Hot's Investment in Cold account as at December 31, 2013

Question 56

Ting Corp. owns 75% of Won Corp. and uses the Cost Method to account for its Investment, chapter) for the Year ended December 31, 2013 are shown below: Other Information: ▪Won sold a tract of land to Ting at a profit of $20,000 during 2013. This land is still the property of Ting Corp.
▪On January 1, 2013, Won sold equipment to Ting at a price that was $20,000 lower than its book value. The equipment had a remaining useful life of 5 years from that date.
▪On January 1, 2013, Won's inventories contained items purchased from Ting for $120,000. This entire inventory was sold to outsiders during the year. Also during 2013, Won sold inventory to Ting for $30,000. Half this inventory is still in Ting's warehouse at year end. All sales are priced at a 20% mark-up above cost, regardless of whether the sales are internal or external.
▪Won's Retained Earnings on the date of acquisition amounted to $700,000. There have been no changes to the company's common shares account.
▪Won's book values did not differ materially from its fair values on the date of acquisition with the following exceptions:
▪Inventory had a fair value that was $50,000 higher than its book value.
▪A patent (which had not previously been accounted for) was identified on the acquisition date with an estimated fair value of $20,000. The patent had an estimated useful life of 5 years.
▪There was a goodwill impairment loss of $10,000 during 2013.
▪Both companies are subject to an effective tax rate of 40%.
▪Both companies use straight line amortization exclusively.
▪On January 1, 2013, Ting acquired half of Won's bonds for $60,000.
▪The bonds carry a coupon rate of 10% and mature on January 1, 2033. The initial bond issue took place on January 1, 2013. The total discount on the issue date of the bonds was $20,000.
▪Gains and losses from intercompany bond holdings are to be allocated to the two companies when consolidated statements are prepared. What is the total amount of pre-tax profit from intercompany inventory sales that was realized during 2013?

A) $2,500.
B) $6,200.
C) $20,200.
D) $22,500.

Question 57

Ting Corp. owns 75% of Won Corp. and uses the Cost Method to account for its Investment, which it acquired on January 1, 2013. The Financial Statements of Ting Corp. and Won Corp. for the Year ended December 31, 2013 are shown below: Other Information: ▪Won sold a tract of land to Ting at a profit of $20,000 during 2013. This land is still the property of Ting Corp.
▪On January 1, 2013, Won sold equipment to Ting at a price that was $20,000 lower than its book value. The equipment had a remaining useful life of 5 years from that date.
▪On January 1, 2013, Won's inventories contained items purchased from Ting for $120,000. This entire inventory was sold to outsiders during the year. Also during 2013, Won sold inventory to Ting for $30,000. Half this inventory is still in Ting's warehouse at year end. All sales are priced at a 20% mark-up above cost, regardless of whether the sales are internal or external.
▪Won's Retained Earnings on the date of acquisition amounted to $700,000. There have been no changes to the company's common shares account.
▪Won's book values did not differ materially from its fair values on the date of acquisition with the following exceptions:
▪Inventory had a fair value that was $50,000 higher than its book value.
▪A patent (which had not previously been accounted for) was identified on the acquisition date with an estimated fair value of $20,000. The patent had an estimated useful life of 5 years.
▪There was a goodwill impairment loss of $10,000 during 2013.
▪Both companies are subject to an effective tax rate of 40%.
▪Both companies use straight line amortization exclusively.
▪On January 1, 2013, Ting acquired half of Won's bonds for $60,000.
▪The bonds carry a coupon rate of 10% and mature on January 1, 2033. The initial bond issue took place on January 1, 2013. The total discount on the issue date of the bonds was $20,000.
▪Gains and losses from intercompany bond holdings are to be allocated to the two companies when consolidated statements are prepared. Ignoring income taxes, what is the amount of unrealized profit/(loss) remaining from the intercompany sale of equipment at December 31, 2013?

A) $16,000 loss.
B) $12,000 gain.
C) $12,500 gain.
D) $16,000 gain.

Question 58

The Financial Statements of Plax Inc. and Slate Corp for the Year ended December 31, 2012 chapters) Other Information:
▪Plax acquired 75% of Slate on January 1, 2008 for $196,000, when Slate's retained earnings was $80,000 and the acquisition differential was attributable entirely to goodwill. There were impairment losses to the goodwill of $6,400 and $1,600 in 2009 and 2012 respectively.
▪Plax uses the cost method to account for its investment.
▪Slate has 10% par value bonds outstanding in the amount of $200,000 which mature on December 31, 2015. The bonds were issued at a premium. On January 1, 2012 the unamortized premium amounted to $2,400 Slate uses the straight line method to amortize the premium.
▪On January 1, 2012, Plax acquired $120,000 face value of Slate's bonds for $123,000 Plax also uses the straight line method to amortize any bond premium or discount.
▪Both companies are subject to a 40% Tax rate.
▪Gains and losses from intercompany bond holdings are to be allocated to the two companies when Consolidated Financial Statements are prepared. Calculate the goodwill as at December 31, 2012.

Question 59

Ting Corp. owns 75% of Won Corp. and uses the Cost Method to account for its Investment, chapters) for the Year ended December 31, 2013 are shown below: Other Information: ▪Won sold a tract of land to Ting at a profit of $20,000 during 2013. This land is still the property of Ting Corp.
▪On January 1, 2013, Won sold equipment to Ting at a price that was $20,000 lower than its book value. The equipment had a remaining useful life of 5 years from that date.
▪On January 1, 2013, Won's inventories contained items purchased from Ting for $120,000. This entire inventory was sold to outsiders during the year. Also during 2013, Won sold inventory to Ting for $30,000. Half this inventory is still in Ting's warehouse at year end. All sales are priced at a 20% mark-up above cost, regardless of whether the sales are internal or external.
▪Won's Retained Earnings on the date of acquisition amounted to $700,000. There have been no changes to the company's common shares account.
▪Won's book values did not differ materially from its fair values on the date of acquisition with the following exceptions:
▪Inventory had a fair value that was $50,000 higher than its book value.
▪A patent (which had not previously been accounted for) was identified on the acquisition date with an estimated fair value of $20,000. The patent had an estimated useful life of 5 years.
▪There was a goodwill impairment loss of $10,000 during 2013.
▪Both companies are subject to an effective tax rate of 40%.
▪Both companies use straight line amortization exclusively.
▪On January 1, 2013, Ting acquired half of Won's bonds for $60,000.
▪The bonds carry a coupon rate of 10% and mature on January 1, 2033. The initial bond issue took place on January 1, 2013. The total discount on the issue date of the bonds was $20,000.
▪Gains and losses from intercompany bond holdings are to be allocated to the two companies when consolidated statements are prepared. What would be the non-controlling interest amount appearing on Ting's Consolidated Statement of Financial Position on January 1, 2013?

A) $298,300.
B) $375,000.
C) $450,000.
D) $500,000.

Question 60

Ting Corp. owns 75% of Won Corp. and uses the Cost Method to account for its Investment, chapters) for the Year ended December 31, 2013 are shown below: Other Information: ▪Won sold a tract of land to Ting at a profit of $20,000 during 2013. This land is still the property of Ting Corp.
▪On January 1, 2013, Won sold equipment to Ting at a price that was $20,000 lower than its book value. The equipment had a remaining useful life of 5 years from that date.
▪On January 1, 2013, Won's inventories contained items purchased from Ting for $120,000. This entire inventory was sold to outsiders during the year. Also during 2013, Won sold inventory to Ting for $30,000. Half this inventory is still in Ting's warehouse at year end. All sales are priced at a 20% mark-up above cost, regardless of whether the sales are internal or external.
▪Won's Retained Earnings on the date of acquisition amounted to $700,000. There have been no changes to the company's common shares account.
▪Won's book values did not differ materially from its fair values on the date of acquisition with the following exceptions:
▪Inventory had a fair value that was $50,000 higher than its book value.
▪A patent (which had not previously been accounted for) was identified on the acquisition date with an estimated fair value of $20,000. The patent had an estimated useful life of 5 years.
▪There was a goodwill impairment loss of $10,000 during 2013.
▪Both companies are subject to an effective tax rate of 40%.
▪Both companies use straight line amortization exclusively.
▪On January 1, 2013, Ting acquired half of Won's bonds for $60,000.
▪The bonds carry a coupon rate of 10% and mature on January 1, 2033. The initial bond issue took place on January 1, 2013. The total discount on the issue date of the bonds was $20,000.
▪Gains and losses from intercompany bond holdings are to be allocated to the two companies when consolidated statements are prepared. What would be the amount of other revenue appearing on Ting's Consolidated Income Statement for the Year ended December 31, 2013?

A) $840,000.
B) $820,000.
C) $815,000.
D) $788,000.

Question 61

The Financial Statements of Plax Inc. and Slate Corp for the Year ended December 31, 2012 chapters) Other Information:
▪Plax acquired 75% of Slate on January 1, 2008 for $196,000, when Slate's retained earnings was $80,000 and the acquisition differential was attributable entirely to goodwill. There were impairment losses to the goodwill of $6,400 and $1,600 in 2009 and 2012 respectively.
▪Plax uses the cost method to account for its investment.
▪Slate has 10% par value bonds outstanding in the amount of $200,000 which mature on December 31, 2015. The bonds were issued at a premium. On January 1, 2012 the unamortized premium amounted to $2,400 Slate uses the straight line method to amortize the premium.
▪On January 1, 2012, Plax acquired $120,000 face value of Slate's bonds for $123,000 Plax also uses the straight line method to amortize any bond premium or discount.
▪Both companies are subject to a 40% Tax rate.
▪Gains and losses from intercompany bond holdings are to be allocated to the two companies when Consolidated Financial Statements are prepared. Prepare Plax's Consolidated Statement of Financial Position as at December 31, 2012.

Question 62

The Financial Statements of Plax Inc. and Slate Corp for the Year ended December 31, 2012 chapters) Other Information:
▪Plax acquired 75% of Slate on January 1, 2008 for $196,000, when Slate's retained earnings was $80,000 and the acquisition differential was attributable entirely to goodwill. There were impairment losses to the goodwill of $6,400 and $1,600 in 2009 and 2012 respectively.
▪Plax uses the cost method to account for its investment.
▪Slate has 10% par value bonds outstanding in the amount of $200,000 which mature on December 31, 2015. The bonds were issued at a premium. On January 1, 2012 the unamortized premium amounted to $2,400 Slate uses the straight line method to amortize the premium.
▪On January 1, 2012, Plax acquired $120,000 face value of Slate's bonds for $123,000 Plax also uses the straight line method to amortize any bond premium or discount.
▪Both companies are subject to a 40% Tax rate.
▪Gains and losses from intercompany bond holdings are to be allocated to the two companies when Consolidated Financial Statements are prepared. Prepare a Calculation of Non-Controlling Interest as at December 31, 2012 for Plax Inc.